The modern supply chain is complex and faces various challenges (Figure 1). Supply chain leaders need to understand the current global challenges and how to reinforce their supply chains to deal with them.
This article will walk you through the top 10 supply chain challenges that organizations face in the current business environment and offer actionable solutions with examples.
Figure 1. Modern supply chain require a different strategy
Tackling supply chain disruptions
From factory shutdowns to transportation delays, disruptions are now an inevitable part of the supply chain landscape. A study1 by McKinsey identified that companies, on average, experience a disruption of one to two months in duration every 3.7 years. The pandemic, for instance, has underscored the fragility of global supply chains, with even the smallest interruption causing a ripple effect across sectors.
Such disruptions lead to significant losses for organizations (Figure 2). One of the biggest challenges for supply chain leaders is to prepare their supply chains for future disruptions.
Figure 2. Supply chain disruptions lead to significant losses
Recommendations: Building supply chain resilience
To weather future storms, businesses need to build more resilient supply chains. This can involve diversifying suppliers, investing in local sourcing, or stockpiling essential components. For instance, a clothing manufacturer could start sourcing fabrics from multiple countries instead of relying on a single one, thereby reducing the risk of disruptions.
Tackling the lack of data visibility and integration
In today’s interconnected world, supply chain operations involve a myriad of systems, from Enterprise Resource Planning (ERP) to Warehouse Management Systems (WMS). However, getting these disparate systems to communicate effectively is often easier said than done, leading to fragmented data and poor visibility across the value chain.
Solution: Leveraging a no-code platform
With the rising number of citizen developers, no-code platforms can significantly simplify this integration process, providing a holistic view of the entire supply chain. Take, for example, an FMCG that uses a no-code platform to integrate its ERP and WMS. The result is real-time visibility into stock levels, order statuses, and potential bottlenecks, empowering the company to make more informed decisions and mitigate risks.
UCBOS provides a no-code supply chain platform to help organizations build integrated supply chain software to improve visibility. The system equips supply chain leaders with dynamic business data models to help improve interoperability and composability.
Preparing for increased demand uncertainty
Consumers are becoming more unpredictable2, leading to increased volatility and unpredictability in demand. This makes forecasting more difficult, impacting inventory management, production planning, and capacity utilization.
Solution: Advanced demand forecasting
Employ advanced analytics and machine learning techniques for demand forecasting. By incorporating factors like real-time sales data, market trends, and even social media sentiment, businesses can create more accurate demand forecasts.
For example, a food producer might use machine learning algorithms to analyze historical sales data and identify patterns that can predict future demand spikes.
Managing rising costs
Post-pandemic, businesses are grappling with increased costs across the board, from raw materials to freight charges. These escalating costs are putting a strain on margins, especially for businesses in price-sensitive industries.
Watch this quick video to further understand how and why supply chain costs have become a problem for business leaders:
Solution: Cost optimization strategies
Invest in cost optimization strategies such as process automation, supplier renegotiations, and waste/damage reduction. For instance, an automobile parts manufacturer might introduce automated assembly lines to reduce labor costs and increase productivity.
Achieving supply chain sustainability
Consumers and regulators increasingly demand sustainable business practices moving sustainability higher on organizations’ priority lists. However, implementing sustainable measures in the supply chain – from sourcing to manufacturing to distribution – can be complex and costly. This is mainly due to the following reasons:
- Sourcing: Locating suppliers of sustainable materials can be difficult and potentially necessitate a total overhaul of existing supply chains.
- Manufacturing: Adapting to sustainable manufacturing often requires costly investments in new technology, staff training, or hiring an ESG team.
- Distribution: Implementing environmentally-friendly distribution methods typically involves significant initial investment and added operational complexity, such as buying route-optimizing solutions or environment-friendly vehicles.
- Assessment and monitoring: Regular evaluation and tracking of sustainability metrics in the supply chain adds complexity and can be both costly and time-intensive.
Solution: Green supply chain initiatives
Invest in green supply chain initiatives, such as eco-friendly packaging, renewable energy, and ethical sourcing. A coffee retailer, for instance, might source beans from certified fair-trade farmers, use biodegradable packaging, and offset its carbon emissions through reforestation projects.
Supply chain leaders can also motivate the top executives towards sustainability if they attach cost savings with sustainable practices (Figure 3).
Figure 3. 61% of companies cited cost savings and efficiency as the top motivators for supply chain sustainability
Mitigating labor shortages
From factory workers to truck drivers, labor shortages are disrupting supply chains worldwide. This is causing delays, increasing costs, and putting pressure on existing staff.
Watch this video to learn more about why the supply chain sector is facing labor shortages:
Solution: Workforce planning and automation
Effective workforce planning, skills training, and automation can help alleviate labor shortages. A warehouse, for example, might use autonomous forklifts and sorting systems to handle peak loads, reducing the need for manual labor. Experts also suggest that marketing supply chain jobs in schools is also one of the ways to fix this issue in the long-run.
Bracing for geopolitical risks
Trade wars, tariffs, and political instability can all disrupt global supply chains. These geopolitical risks are difficult to predict and can have significant impacts on costs and lead times. For instance, the Russia-Ukraine war has significantly impacted global logistics operations, which is one of the key functions of supply chains.
Watch the video below to learn more about the impact of the war on global supply chains:
Solution: Diversified supply base
This issue also comes down to the level of resilience of the supply chain. By diversifying their supply base across multiple countries, businesses can mitigate geopolitical risks.
However, For some companies, it can be difficult to find alternative suppliers due to the nature of the materials. For instance, for smartphone manufacturers, some materials can only be purchased from certain suppliers in certain countries. In this case, companies need to plan in advance and make sure their supply network is diverse enough to mitigate the risk of geopolitical disruptions.
Avoiding cybersecurity threats
As supply chains become more digital, they are also becoming more vulnerable to cyber threats (Figure 4). These can range from data breaches to ransomware attacks, causing significant financial and reputational damage.
Solution: Robust cybersecurity measures
Implement robust cybersecurity measures, such as firewalls, encryption, and regular security audits.
Figure 4. Digital supply chain risk is one of the top cybersecurity threats
Meeting customer expectations
Customers now demand faster deliveries, greater transparency, and more customization than ever before. Meeting these high expectations requires a flexible and customer-centric supply chain.
Solution: Customer-centric supply chain
Adopt a customer-centric approach, focusing on aspects like delivery speed, order accuracy, and communication. A fashion e-commerce brand, for example, might use data analytics to personalize shopping experiences and offer flexible delivery options.
Check out our guide to finding the right eCommerce analytics tool for your business.
Meeting regulatory compliance
With regulations becoming more stringent worldwide, maintaining compliance can be a significant challenge for global supply chains with vast supply and distribution networks.
Solution: Compliance management systems
Invest in compliance management systems and regularly update compliance policies to ensure they are in line with the latest regulations. A pharmaceutical company, for instance, could use a cloud-based system to manage and track regulatory compliance across multiple countries.
- No Code Supply Chain: Benefits & Vendor Benchmark
- Choosing The Right Supply Chain Integration Software
- Top 6 Supply Chain Collaboration Software
If you need help finding a vendor or have any questions, feel free to contact us:
- McKinsey (2020). Risk, resilience, and rebalancing in global value chains. Accessed. 13/July/2023.
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